Two Groups Appeal GPU Merger 


Clean Air Council, Citizen Power Ask Court
to Overturn State Puc's Approval of $11. 9 Billion Deal with First Energy.


Allentown Morning Call ( July 20, 2001 )
Two statewide environmental groups filed an appeal Thursday to the proposed
$11.9 billion GPU-First Energy merger, claiming the combination of the power
companies would hamper Pennsylvania's competitive electricity market and
increase air pollution.
 In their appeal, Philadelphia's Clean Air Council and Pittsburgh's
Citizen Power ask Commonwealth Court to overturn the state Public Utility
Commission's merger approval.
"It's not intended to delay it. It's intended to kill it," Citizen
Power Executive Director David Hughes said of the appeal. "We think the
merger is anti-competitive and therefore will be harmful not only to
ratepayers but to competition in Pennsylvania generally."
Clean Air Council and Citizen Power claim the PUC's decision to
approve the merger was illegal and reflected "arbitrary and capricious abuse
of administrative discretion."
The PUC approved the merger between GPU of Morristown, N.J., and First
Energy of Akron, Ohio, in May. Last month, the PUC approved an electric rate
settlement the two companies negotiated with the Pennsylvania Office of
Consumer Advocate and several ratepayer groups.
The settlement allows GPU to recover money it has lost by purchasing
power on the wholesale market and reselling it to consumers at state-imposed
rate caps.
But the deal also guarantees that GPU Energy customers won't see
electric rate increases for the rest of the decade. It also requires GPU and
First Energy to invest $15 million in renewable energy sources such as wind
and solar.
GPU serves 1.1 million electric customers in Pennsylvania, including
54,800 customers in Northampton County and 131,500 customers in Berks
"Much hard work and many, many hours of careful attention went into
that, and we think that's a workable settlement," GPU spokesman Ned Raynolds
said. "It has the endorsement of all the major parties and the approval of
the PUC."
But Citizen Power noted that nine groups declined to sign the
settlement agreement, while only five organizations supported it.
"It's clear the PUC was desperate to find a way to help GPU," Hughes
said. "The PUC approved the merger without requiring the companies to meet
their burden of proof that it would be in the public interest. The PUC also
granted GPU rate relief, even though the company created its own problems."
PUC officials were not available for comment Thursday afternoon.
GPU divested all its electric generation plants and became a power
transmission company after Pennsylvania deregulated its electricity industry
in 1997. As a result of record wholesale power prices, GPU was forced to pay
more for its electricity than it could charge customers under state rate
As part of its application to merge with First Energy, GPU had asked
the PUC for a $316.7 million rate hike to recover those costs. Under the
terms of the rate settlement, those costs will be deferred, and GPU can seek
rate relief beginning in 2011.
Clean Air Council and Citizen Power warn that this could result in
high consumer electric rates from 2011 to 2015.
In the meantime, a merger with First Energy, which owns numerous
coal-fired power plants in the Midwest, would greatly reduce the amount of
power GPU has to purchase on the expensive wholesale market.
Clean Air Council claims that will harm the environment by increasing
the amount of toxic plant emissions wafting into Pennsylvania from First
Energy plants in Ohio.
"First Energy has a number of power plants that emit pollutants at
many times the levels of modern plants, and they intend to crank them up to
meet GPU customer demand," said Joseph Otis Minott, the council's executive
"Given that the prevailing winds run west to east, this poses a health
risk to Pennsylvanians and to the state's ability to meet the federal health
standard for ozone."
Citizen Power attorney Harvey Reiter said Thursday's appeal is one of
several that have been filed regarding the PUC merger approval, and he
predicted the court will combine the various appeals into a single case.
Besides resolving the Pennsylvania appeals, GPU and First Energy need
approval from federal and New Jersey regulators before the merger can be
A merger between GPU and First Energy would create the nation's
sixth-largest investor-owned utility. The combined company would serve about
4.3 million customers in New Jersey, Pennsylvania and Ohio and have annual
revenue of about $12 billion.
Reporter Christian Berg